Phillips: Interim audit of Metro offers promising strategies for narrowing transit budget gap

May 19, 2009

Summary

Story

An interim report on an audit of Metro Transit requested by Metropolitan King County Councilmember Larry Phillips has uncovered a one-time reserve of as much as $105 million more than needed in a fund for replacement of Metro buses.

“The transit performance audit is doing exactly what I hoped it would: it gives us real dollar options to avoid looming, drastic cuts in service,” said Councilmember Phillips. “My hope in initiating this audit was to find efficiencies and opportunities to make Metro’s budget more transparent, revealing all available options before cutting service or asking voters for more transit revenue. Already, only partway through the audit, those opportunities are materializing—in a big way.”

The interim audit report focused on the area of financial planning and found that Metro’s financial planning has been conservative and prudent – so much so that Metro’s Revenue Fleet Replacement Fund holds more money than is needed for fleet replacement, by as much as $105 million. The initial findings of the audit were presented today to the Council’s Government Accountability and Oversight Committee.

Auditors also found that Metro in the past has overestimated capital expenditures while underestimating revenue from capital grants, so that more resources were available for operations from 2002 to 2006 than was projected in the financial plan.

Auditors offered the following preliminary recommendations:

• Provide an enhanced financial model to decision-makers,
• Review and update Metro’s financial policies,
• Improve forecasts for capital grant revenue and capital expenditures, and
• Develop a plan to reduce the fleet replacement fund balance.

The performance audit was proposed by Phillips last year as part of the 2008 Auditor’s work program. By November 2008, when a sharp drop in the sales tax revenues that support bus service led to a projection of a $90 million shortfall in the 2010-2011 biennium, Phillips called for expanding the scope of the audit to focus on finding one-time and ongoing efficiencies throughout the Transit Division to address projected budget shortfalls in 2010 and beyond. Since then, the deepening global recession has caused Metro’s projected shortfall to grow to $168 million for the next two years, with an annual shortfall of $142 million by 2013.

The transit audit is looking for money-saving opportunities and efficiencies in the areas of financial and capital planning, bus and trolley service, data and technology, vehicle maintenance, and human resource management. The full audit report and findings will be available in September prior to submission of the 2010 Executive Proposed Budget.

The Council initially designated $300,000 to pay for a performance audit, then increased the budget by $700,000 in the 2009 budget. The audit is being conducted by the King County Auditor’s Office and a team of consultants led by the firm of Booz Allen Hamilton.


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